Best alternatives to traditional performance reviews

Top enterprises are ditching the formal, annual, rack-and-stack performance review processes that were once considered a marvel of human resources innovation. Now comes the hard part—what to do instead?

Some cute tactics have emerged, such as crowdsourced bonus plans which rely on peer endorsement to separate compensation from formal evaluation. But such systems hardly eliminate political gaming and can be difficult to scale across functions. The traditional annual scoring ritual caught on because, for all its faults, it was predictable, consistent, and repeatable.

Today, those characteristics are liabilities. “Big companies tend to have a hard time treating employees like individuals,” says Greg Barnett, VP of Research and Development at PI Worldwide. “But in the world of social and mobile tech, the consumer experience is becoming highly individualized and tailored, and people want that from the jobs they spend their lives in.”

Why reviews have to go…

Performance reviews are on their way out because we simply have better tools to evaluate an individual’s contribution to value and performance against expectations and potential than we had 40 years ago. Now that those questions can be answered precisely, often in automated fashion, a single supervisory review is far less important.

“The performance review doesn’t do a good job of translating an employee’s attitude, behavior, and soft abilities into the concrete, tangible outputs that are the lifeblood of the organization,” says David F. Giannetto, consultant and author of Big Social Mobile.

Some organizations struggled even to calibrate the results of reviews against the tendencies of their evaluators. A score of 4-out-of-5 from a reviewer who never gives out low scores means much less than the same score from an evaluator who, on average, gives out lower ratings. “You have to hold the reviewer to task just as much as the subordinate being reviewed,” Giannetto says.

… and why they’ll never disappear

Corporate titans with hundreds of thousands of employees are shedding the old ways of performance reviews, so the problem is not too big to solve. But many organizations will still have a parallel review track, salted with new and more powerful approaches, because the old ways provided cover for sticky employee relations situations.

“From a legal standpoint, many will still need to use performance appraisals to make decisions, because sometimes that’s the data you need when you have to go to court,” says Mark C. Frame, associate professor in the Middle Tennessee State University Department of Psychology. “You still need some way of quantifying and qualifying whether someone met their goals, and how well, so you have some degree of perceived objectivity.”

Feedback from everywhere

Any alternative method of employee evaluation should be put to a basic test: what does this method tell you about what Frame calls the “murky middle”—the people worthy of praise, advancement, and/or greater compensation who are not the obvious top performers or egregious slackers? Old school rank-and-yank, however brutal, was at least decisive about solving that particular problem because it forced a ranking order on that cloud of average contributors.

360-degree feedback is one solution. In this approach, job evaluations and input come not just from a direct supervisor but from peers, underlings, and even completely unrelated departments. Endorsements and complaints from these diverse sources can help better establish the best-of-the-rest because it makes clearer how everybody’s contributions affect the entire organization.

By providing more consistent input, the 360-degree system also helps manage employee expectations. “If you’re constantly getting feedback about how you can better do your job, it should not come as a surprise to you when we sit down to talk about raises and promotions that you’re rated well, but not as highly as someone else,” Frame says.

Coordinating around objectives and expectations, rather than hard measures of value, is another emerging approach, and one which good managers should already be following. “You should be able to have formal and informal conversations with people on an ongoing basis, without having to mandate it,” Barnett says. “You should know what drives your people, what they want out of their career, and be able to express to them the realities of their employment contract and what they can have that is realistic.”

These conversations also make it possible to do a root-cause analysis of problems as they emerge, because managers understand the expectations, aspirations, and goals of their employees from the very beginning of the work relationship. “If you hired somebody because they had a great attitude, and they don’t now, what is he doing now that he’s not happy about?” says Idan Shpizear, CEO of 911 Restoration Franchise.

Asking the right questions at the right times

Turning the frequency up but the intensity down is another approach. Regular coaching sessions are already common in the call center world. These short, focused sessions emphasize current course corrections, not big-picture annual blowouts.

“Basic psychology tells us that if you’re going to reinforce or punish some behavior, you want to do it as soon after the behavior happened as possible,” Frame says. “Waiting a month is not a good idea and waiting a year is definitely not a good idea.”

Shpizear is a fan of this method, emphasizing execution against established processes on a weekly basis, rather than big-picture annual reviews. “I’m looking for a commitment to our processes, and where our employees are in terms of their weekly activities and the goals we are trying to reach,” he says. “As long as our processes are right, the results are going to come, and I’m not going to meet with teams if the results are there.”

A different spin on the 360-degree approach is the bottom-up evaluation, in which employees rate their supervisors and the work environment as a whole. Even asking a single question, in Net Promoter style, about whether an employee would recommend the workplace to others can be a tremendous eye-opener. “If you learn that your employees know something about the business culture that they don’t want to own, that’s really powerful,” Barnett says.

Finally, any new evaluation method must incorporate a constant eye on updating job expectations and responsibilities. In a fast-paced business world, people can quickly end up with an undefined role because their chief responsibilities have been eliminated or reassigned. Those situations are ripe with potential for under-performing and dissatisfied employees, but Barnett says vigilance delivers the cure. “It’s unfair to leave people without goals or purpose, and that’s where constant touch-bases can make a big difference.”